International Multifoods Corporation and Affiliated Companies - Page 10

                                       - 10 -                                         
               Petitioner contends that section 865 compels symmetrical               
          treatment for gains and losses.  Since it is a U.S. resident,               
          petitioner argues that its loss from the sale of the Paty stock             
          must be sourced in the United States.  See sec. 865(a)(1),                  
          (g)(1)(A)(ii).  Respondent, on the other hand, contends that                
          section 865 applies solely to the sourcing of income from the               
          sale of personal property.  The rules governing the allocation of           
          losses, respondent maintains, remain those contained in                     
          regulations promulgated under sections 861(b) and 862(b).                   
          Respondent argues that the Tax Reform Act of 1986 did not modify            
          the preexisting regulatory rules respecting the allocation of               
          losses from the sale of personal property.                                  
               Section 861(a) provides rules for sourcing gross income                
          within the United States, and section 862(a) provides similar               
          rules for sourcing gross income from sources without the United             
          States.  Section 863(a) authorizes the Secretary to prescribe               
          regulations specifying the methods of allocation for expenses,              
          losses, and deductions that are derived from domestic and foreign           
          sources.  Section 1.861-8(b), Income Tax Regs., provides that               
          deductions are allocated to the class of gross income to which              
          they are definitely related.  Section 1.861-8(e)(7), Income Tax             
          Regs., provides rules for the allocation of losses on the sale,             
          exchange, or other disposition of a capital asset or property               
          described in section 1231(b).  Pursuant to its provisions, such             
          losses are considered definitely related and allocable to the               

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  Next

Last modified: May 25, 2011